Young entrepreneur Fan Bingbing has launched a business venture in which she uses stories submitted by university students as the basis for comics in a monthly animestyle magazine. Based on market research, Fan estimates that average monthly demand will be 500 copies. She has decided to model monthly demand as normal random variable with a mean of 500 and a standard deviation of 300.
Fan must pay a publishing company $3.75 for each copy of the comic printed. She then sells the magazine for $5 each. Rather than having a store-front, Fan sells the magazines through a group of student vendors who sell the comics out of their backpacks while on campus.  an pays a student vendor $0.35 for each magazine he/she sells. As Fan distributes a new issue each month, she only sells each issue for a month.However, the publishing company has agreed to buy back from Fan any unsold copies at the end of each month for $2.25.
a. As Fan validates the simulation model you have constructed, she observes something troublesome regarding the use of the normal distribution with a mean of 500 and a standard deviation of 30 to model monthly demand. What is it? How can you modify the simulation model to address this issue?

b. Based on the simulation model that incorporates a remedy for the validation issue observed in part (a), what is the estimate of the average profit if Fan sets the order quantity to 1,200? What is the 95% confidence interval on this estimate of average profit?

c. For an order quantity of 1,200 copies, what is the profit value such that 2.5% of the profit outcomes are smaller than this value? What is the profit value such that 2.5% of the profit outcomes are larger than this value? These two values define a range which 95% of the profit outcomes lie between. Why doesn’t this range correspond to the 95% confidence interval in part (b)?